US open: Stocks higher following strong non-farm payrolls report, oil rebounds

US equity markets were higher on Wednesday following a strong February jobs report almost confirming an interest rate hike next week.

At 1547 GMT, the Dow Jones Industrial Average was up 0.13% to 20,884.63, the S&P 500 rose 0.27% to 2,371.22 and the Nasdaq was 0.34% firmer at 5,858.73.

Meanwhile, oil prices were slightly higher after finishing at the lowest level in over three months on Thursday after higher-than-expected US inventory data raised concerns of oversupply and sparked a sell-off.

West Texas Intermediate was up 0.61% to $48.98 a barrel - it went below the $50 mark for the first time in 2017 on Thursday - while Brent crude rose 0.69% to $51.83.

In currency markets, the dollar was flat against the pound 0.8220, was down 0.75% versus the euro to 0.9383 and unchanged against the yen to 114.98.

Solid non-farm payroll numbers are set to keep the Federal Reserve on track to raise interest rates next Wednesday and investors have now turned their attention to the next two hikes this year, possibly in September and December.

February’s non-farm payroll rose to 238,000 from 227,000 the previous month and above the 200,000 consensus forecast. The net revision was 9,000.

Hourly earnings rose 0.23%, below the 0.3% consensus, but the net revision was up 0.12%, so the year-on-year rate increased to 2.8% from 2.6%, as expected, while unemployment dipped a tenth to 4.7%, in line forecasts.

Manuel Ortiz-Olave, market analyst at Monex Europe said that investors are now more sceptical about forthcoming hikes.

He said that the report was solid with the unemployment rate falling, labour force participation rising and the underemployment rate decreasing, but despite a massive increase in job creation in the first two months of 2017, wage growth missed estimates even after several states increased the minimum wage.

Fed chair Janet Yellen and vice chair Stanley Fischer suggested last week that the central bank only intends to hike interest rates if wage inflation continues to increase and employment keeps meeting the Fed’s expectations.

Ortiz-Olave said that with the recent substantial increase in US crude oil inventories, market bets of falling inflation are increasing, which could delay additional rate hikes from the Fed.

Analysts at Rabobank have doubts about the Fed’s plans to hike interest rates three times this year, as “any kind of negative event could stop the Fed in its tracks and slow down the hiking cycle”.

The bank said that the timing, size or impact of the much vaunted US government fiscal policy plans could disappoint, protectionist policy measures - including a possible border adjustment in the new tax plan - could cause trade conflicts that would have a negative impact on the economy, and lastly the global economy may have some negative surprises in store for the Fed, which appears to see less risk from overseas.

“Global growth is weak to begin with, and could be undermined further by protectionist tendencies around the world or adverse effects from rising dollar interest rates. Meanwhile, China remains a downside risk to the global economy, and the same is true for developments in Europe.

“We still think that the probability of reaching the end of the year without an accident is smaller than 50%,” Rabobank strategists said.

The Fed will meet on 14-15 March concluding and publish updated projections for GDP growth, PCE inflation, unemployment, and the federal funds rate.

In corporate news, Commercial Vehicle Group was down 2.59% after posting a fourth quarter profit but revenue fell, while Everspin Technologies was 4% weaker after reporting a fourth quarter drop in revenue.

Southwest Airlines was 3.18% weaker after it lowered its unit revenue outlook for the first quarter.